State Street Global Advisors is making its first real foray into the retail business in Asia by selling its "Balzac" series of index funds in Hong Kong. Citibank is its exclusive distributor.
Winnie Pun, SSGA's director of investments in Hong Kong, says the idea came from requests by investors in the Tracker Fund, Asia ex-Japan's first exchange-traded fund. "Retail investors can't form a portfolio just around the Tracker Fund," she says. "They wanted a full range, for technical or strategic allocations. Doing this with traditional active funds just isn't the same, in terms of fees or transparency."
Vincent Duhamel, CEO at SSGA in Hong Kong, adds, "The Tracker Fund has increased the awareness of index investing among Hong Kong retail investors."
Importing an existing line of Paris-listed SICAV funds was also fairly easy. Pun says the only hitch was translating everything from French to satisfy the Securities and Exchange Commission.
"Index funds are a cost-effective, risk-diversified way for investors who have difficulty picking one fund or market or stock," says Angel Ng, director of wealth management at Citibank's global consumer group.
Ng acknowledges that guaranteed funds remain the rage among retail investors, primarily among novice investors fleeing bank deposits. Citibank will target more sophisticated customers for SSGA's index funds. "We will go for customers seeking stability, a balanced portfolio and who want to participate in any market upside."
Duhamel says SSGA will also seek to bring index funds to other Asian jurisdictions. But that depends less on customer demand and more on regulations. Pun says she is investigating other North Asian markets, but there is a lot of paperwork involved. "We'll do the easy market first, and tackle other markets one by one."
The funds now available in Hong Kong include the Balzac World Index Fund, the Balzac US Index Fund, the Balzac Japan Index Fund and the Balzac Euro Index Fund, all of which are benchmarked against MSCI indices.
SSGA manages about $763 billion globally.